As Scams Surge, Banks Must Defend Customers – Not Just Themselves
Financial fraud is increasingly a psychological threat, not just a technical one. At times of financial stress, banks need to focus more on identifying and support vulnerable customers, not just protecting their own platforms and data.
When the economy slows, scams surge.
This harsh reality is one that banking leaders can no longer afford to ignore. In my decades of working in cyber intelligence and fighting financial crimes, I’ve observed a dramatic transformation in how scams are executed. What was once predominantly a technical problem has evolved into sophisticated psychological warfare. When financial stress compels customers to take risks in recessionary environments, fraudsters exploit these vulnerabilities with alarming precision. During these periods, banks and other financial institutions must double down on proactive fraud prevention strategies.
Industry discussions and my firsthand observations suggest that scams now represent a significant portion of fraud costs. In meetings with 30 leading banks across the USA, Canada, UK, and Europe, scam-related losses have emerged as one of the most critical concerns. In some cases, scams account for 40 to 50 percent of a bank’s total fraud incidents, without even accounting for the fact that scams are notoriously underreported due to shame, guilt, or lack of awareness. The fact that scams have risen to the top of the risk chart reflects a fundamental shift in the threat landscape, where financial stress makes customers particularly susceptible to manipulation.
A compelling example can be seen at JP Morgan, where the bank recently invested in a dedicated behavioral science team to support fraud prevention initiatives. By integrating psychological insights with data analytics, JP Morgan has significantly reduced losses from scam activity, preventing their customers from losing an estimated $12 billion. This move demonstrates a key lesson: by understanding the human factors behind scam susceptibility and proactively intervening, banks can create robust defenses that preserve both assets and trust.
AI is a Powerful Fraud Accelerant
The rising tide of fraud is fueled in large part by innovative scam tactics that leverage artificial intelligence. Deepfakes and advanced impersonation schemes allow fraudsters to create hyper-realistic scenarios that trick even the most cautious customers. These AI-powered operations personalize attacks and scale their efforts in real time, outpacing traditional fraud detection systems. Faced with these developments, banks must adopt measures that both identify potential risks and intervene before a scam can inflict damage.
Scams today are not isolated crimes. They are industrialized, global operations. Investigations into Southeast Asian scam factories have uncovered networks run by transnational crime syndicates, often involving human trafficking. These “scam compounds” employ, and sometimes force, thousands of people to execute complex, emotionally manipulative schemes targeting victims around the world. Tactics like pig butchering, fake investment platforms, and romance scams are often supported by generative AI tools, dedicated fraud resources capable of generating deepfakes and custom phishing scripts at scale.
At its core, modern fraud is about psychological manipulation. Fraudsters exploit the trust that customers place in their financial institutions — a trust that, once broken, can be nearly impossible to restore. Banks that invest in understanding and mitigating these behavioral vulnerabilities stand a far better chance of protecting their customers. By combining real-time data with actionable insights from behavioral science and psychology, banks can preemptively pinpoint high-risk situations and reduce losses.
To effectively counter today’s scams, banks need to think beyond detection and toward true prevention. That means equipping fraud and security teams with AI tools that are constantly trained on the latest scam trends and human vulnerabilities, and have the ability not only to detect scams, but also to intervene and prevent them in real-time. New approaches such as AI-powered “scam prevention agents” can be embedded within banking apps to deliver personalized warnings, verify transaction safety, and even simulate real-time conversations that help customers recognize and break free from a scammer’s influence. Same AI agents could also offer post-scam support and remediation for victims, while feeding data from their reports back into the detection and prevention models to protect other customers.
How to Identify and Support Vulnerable Customers
Some banks are also experimenting with customer “security scores,” which evaluate risk based on behavioral patterns, transaction histories, and exposure to red-flag scenarios. These scores can trigger proactive communication, before a transaction takes place, offering users context-specific insights or education. Rather than blanket emails about general scam awareness, these systems deliver highly tailored insights and can provide alerts like: “This recipient has been flagged in other scam cases,” or “This transaction appears unusual based on your history.”
Scams and social engineering attacks are at the intersection of cybersecurity and fraud. Recent surveys underscore the urgency: 84 percent of bank senior executives and board members now cite cybersecurity as one of the top institutional risks, with 69% saying the same about fraud. This statistic should serve as a wake-up call for the industry. When traditional fraud detection methods fall short, banks must embed proactive, behavior-based tools into their security frameworks. Yes, these measures safeguard financial assets, but just as important, they reinforce long-term customer trust and loyalty.
Institutional alignment is a key part of an organization’s scam prevention strategy. Effective financial institutions are establishing cross-functional “cyber-fraud” fusion teams that bring together fraud prevention, cybersecurity, compliance, and behavioral science. These task forces respond and anticipate scams, building response playbooks and accelerating time-to-intervention. The most effective models also include support from executive leadership, marketing, and customer service, creating a truly enterprise-wide fraud prevention strategy.
Regulators are also beginning to shift their focus. At a House Financial Services Committee hearing on April 1, 2025, industry leaders testified to the staggering growth of scams, particularly those targeting older adults, and called for improved public-private data sharing and more adaptive compliance frameworks. The message was clear: scams are no longer fringe fraud problems. They are systemic threats that demand new thinking, new tools, and new forms of collaboration.
Economic downturns create a fertile environment for scams, as financial desperation lowers customers’ defenses and amplifies risk, as well as pushing more scammers, fraudsters, and cyber criminals into the market. It is vital, then, that banks adopt a forward-thinking, comprehensive approach to fraud prevention, with a strong emphasis on the human factor. By integrating advanced analytics, AI-driven risk scoring, and behavioral insights, banking institutions can anticipate and intercept fraudulent schemes before they inflict significant harm. In doing so, they protect not only their bottom line but the essential relationship of trust with their customers.